Capital Pub Company cheers Greene King takeover offer

Stockopedia

Jul. 19, 2011, 5:01 AM

AIM listed pub operator Capital Pub (LON:CPUB) has recommended that its shareholders back a 235p per share takeover of the company by FTSE 250 rival Greene King (LON:GNK). The move follows several months of speculation over a possible deal involving Capital Pubs, including two rejected offers of 175p and 200p from another pub group, Fuller Smith Turner (LON:FSTA). In early trading this morning shares in Capital Pubs jumped by 26p to 236.5p; Greene King gained 2.70p to 482.9p and the Fullers share price was unmoved at 701.25p. Greene King's cash offer values Capital Pubs at approximately £70 million and implies an enterprise value of £93 million. The offer price represents a premium of approximately 51% to the closing price of 155.5p per share on June 16, 2011, which was the last dealing day before Capital Pubs entered an offer period. The offer price is inclusive of a final dividend of 2.25 pence. It is understood that the larger group has so far received irrevocable undertakings to accept the offer from shareholders representing 33.68% of Capital Pubs' share capital. Greene King said it believed the acquisition not only represented an opportunity to maintain and develop the existing strengths of Capital Pubs as part of the larger group, but also an opportunity to create an even stronger pub retailer within the attractive and growing premium eating and drinking out market in London. The combined business will operate approximately 250 pubs within Greater London and Greene King sees significant benefits from operating Capital Pubs alongside its recent acquisition, Realpubs, and its existing premium London pubs. There are also specific opportunities to grow food and accommodation participation within Capital Pubs. The acquisition of Capital Pubs is expected to be earnings enhancing to Greene King in the first full year of trading and will generate returns above Greene King's cost of capital in year one. Rooney Anand, the chief executive of Greene King, said: "The proposed acquisition represents another firm step as we continue to expand our presence in London. Capital Pubs would bring a further 34 premium pub assets and take our Greater London estate to approximately 250 at a time when London is outperforming the national pub market. This offer represents a fair price for a high quality, largely freehold pub estate. Capital Pubs is a premium London pub company that fully meets our criteria as we continue to progress our retail expansion strategy. Capital Pubs' estate fits well within the Greene King portfolio and we intend to combine it with our recently acquired Realpubs business, thereby generating attractive cost and revenue synergies." Clive Watson, the chief executive of Capital Pubs, added: "Greene King is an excellent cultural fit with Capital Pubs and will be a good home both for the business and for our staff. Greene King is renowned for nurturing the businesses it acquires and I have every confidence that Capital Pubs will continue to develop under its ownership. We have recommended Greene King's deal to shareholders as we believe it reflects both our high quality business and its prospects."